"Is nothing sacred anymore", I thought, as I received my 200th holiday greetings e-card from some person I have never heard of, trying to use the opportunity to have me tell me about his company's incredible achievements in 2011. Buddy - if you want to sell me something, or tell me how great your company is, just send me a pitch claiming you're the best - and I may even read it. But pretending you know me and using that as the guise to get my attention, just incites me to press that delete button and not give you a second of my time.

This is just one example of how social media is driving the human element out of our business interactions. There's just too much interaction out there, too much opinion, too much self-promotion and - let's face it - too many bloody people with seemingly nothing better to do. Come to think of it, I don't think there has been a time in my career when I've known so many people who I can't figure out what is it they actually do all day, how they make any money for themselves, or others. And I can't figure out, for the life of me, why some companies pay some people to do what it is they supposedly do all day.

In fact, I probably spend more time avoiding people these days than trying to network with them - few seem to have anything interesting to say, any new ideas about where the world is going and simply are following the commonly agreed set of "industry trends" that most people have been force-fed by industry influencers who are running out of sexy new ideas (or ran out a while back, and are bumbling along on empty until they find something new to grab onto).

What happened to the times when peoples' opinions mattered - even if they were wrong, or were just plain off-the-wall? Economic and political paralysis, exacerbated by inane electronic social networking has sapped so much of the passion, creativity and enthusiasm from our professional lives. I find myself increasingly spending time with people who are interested in sport, music, movies or just playing with the kids, because at least there is enthusiasm and passion there. But going out for dinners with faceless executives to talk about cloud-bloody-computing - and how it is going to change the world... without being able to explain why, just that it will, because they need to sound cloudy... don't get me started!

What we need is a dose of renewed optimism, that our world has an exciting future, that there will be areas for renewed growth, renewed innovation, renewed opportunities. That we have exciting careers where we can constantly find new challenges and invigorating things to do. Have you ever known a time when so many people cling to the job they hate because it's the only way they know how to make a paycheck these days, and are too nervous to even consider a new challenge? Too many people are stuck in a professional status quo - and have been since the 2008 crash scared the professional lives out of so many. I have lost count of the number of people who are just plain miserable in their jobs, have lost confidence in their management and their companies' offerings and directions, and are losing that spark and desire to find something that will give them that renewed energy and that passion? Many people seem to be so jaded these days, and it worries me that they will struggle to ever be truly energized and passionate about what they do again.

So let's make 2012 the year of getting passionate again! Let's dig deep to be honest with ourselves about what gets us up in the morning - what will make us look forward to going to work again. Paralyzed politicians won't come with the answers, and neither will directionless corporate managers - only you can summon up the courage and passion to make a difference. Take a risk - jeez, take a pay cut if you have to - but if you lose your passion for what you do, you'll find it harder and harder each year to get it back.

Well, another year goes by and HfS yet again escapes any legal action, terrorist attacks at our office, or disappearing bodies, for being thoroughly unafraid to call the industry on its issues. So let's reflect some of the defining outsourcing moments of 2011...

January

Ditch Procurement!

Deb Kops began the year in feisty fashion by declaring war on the procurement function... Is traditional procurement deeply involved in M&A activity? Corporate strategy? Business transformation? Not a chance. While our friends in the CPO’s office have an important role to play in procurement process and governance, they cannot be the major arbiter of taste when it comes to sourcing true corporate change.

RIP Joe Vales

The nicest guy in sourcing - and one of the best marketing guys you'd ever met - Joe Vales, sadly passed away... An avid fan of HfS, he will be sorely missed by us, and am sure many of you will be equally saddened by his passing. He was a sweet and lovely guy, who loved his work.

Impatient Premji plays catch-up

You won’t see a CEO being removed after achieving a double-digit growth rate too often, but that’s just what happened, when Wipro’s co-chiefs Suresh Vaswani and Girish Paranjpe were replaced by TK Kurien... So will Premji’s impatience to produce numbers as stellar as his competitors be rewarded, or has he already missed this phase of hyper-growth in offshore services?

February

EquaTerra + KPMG – a new era, or a new error for outsourcing advisory?

KPMG became the only "Big 5" management consultant to buy a boutique sourcing advisor... The outsourcing advisory business is all about talented people, experience and relationships. It would have been extremely messy if KPMG had tried to hire away these folks one-by-one. They have retained the top talent and have created careers for them within their organization. Quite simply, there is a really bad (and worsening) talent shortage in our industry, and KPMG has just snapped up a good portion of it in one full swoop.

March

So what on earth does the future hold for sourcing advisors?

Esteban Herrera doesn't hold back when he declares, "Twenty-five years at EDS may have made you an expert at outsourcing IT, but it did not teach you how to run a recalcitrant back office environment that is just plain hard to optimize."

HfS takes a deep look into Latin America's sourcing capabilities

Clients attest to lower attrition levels and fewer site visits, and when they were required, these site visits as part of the governance were much easier to do—these and other soft factors impact the total cost of ownership. Download your copy of the report here.

How 10-year-olds explain Cloud Computing

The most concise way anyone has succeeded in describing it. One has aspirations to make a video game that features a villain with a head made of cheese puffs.

And when you look at the overall performance of Infy's development in BPO, surprisingly only a third is coming from the foundation horizontal of most traditional BPO providers - finance an accounting. Impressively, Infy has developed its strengths in less mature BPO markets, such as financial services and, surely the jewel in its recent performance, sourcing and procurement.

Moreover, Infy has been growing footprints in its clients by linking together supply chain and customer management processes, such as supply chain visibility, inventory management, logistics optimization, integrated service management, demand planning, order management and aftersales services - bolstered by its analytics competences.

With its sourcing and procurement (S&P) practice up to $40m this year - not an insignificant size in this immature market, especially when you bear in mind they have built this service line from practically nothing in four years - Infy has made its first substantial investment in the sourcing and category management space, picking up the lead Australasian provider Portland Group for $37m.

There will be technical weenies that exhort today’s acquisition of Emptoris by IBM as yet another acquisition that will cause cosmetic commerce IP networks to collide in a dizzying array of cloudy business models. With $20 billion allocated to their acquisition war chest, IBM’s incoming CEO clearly intends to accelerate commerce particles until a thick blue fog settles around us all. The most technical of these weenies will explain this acquisition with their aaSes (PaaS, BPaaS, and SaaS) leaving procurement geeks with an impression it is all a stinky game of charades.

And then there will be the procurement weenies that scratch their heads and wonder why anyone would want to run a reverse auction for enterprise software on a platform managed by the service provider competing in the bidding. Especially when eRFX management, Emptoris’ bailiwick, is widely available from a long list of competitors who are busy pricing themselves out of business. Frankly, it wouldn’t be surprising to see a $0.99 iPhone app for strategic sourcing. Except, they’d soon be confronted with the king patent troll of all patent trolls, the so-called inventor of competitive bidding. LOL.

So what’s the skinny on this marriage of Emptoris and IBM and why should you care?

The story begins with Procurement BPO. For a long-time the red-headed stepchild of the $50bn Finance and Accounting BPO market, Procurement BPO has silently grown into a respectable market with more than 400 deals with an estimated expenditure of of $2.5 billion this year. It is primed to be the most widely-adopted virgin BPO category at the enterprise level, with a fifth of them exploring first time adoption over the next year (Exhibit 1).

Procurement BPO is a real winner in the marketplace because service providers have proven capabilities that internal procurement executives have toiled against all the odds to create. Casting off the shackles of labor arbitrage, Procurement BPO service providers bring heavy category expertise to bear in sourcing events and category management. The results are impressive – the

Remember the HfS 25, that elite group of 25 fine sourcing governators, brought together to debate the future of outsourcing? Well, after exactly one year, sadly it is no more...

...because it's now the HfS 50! Yes, the fiftieth organization has signed up and we're very, very excited to announce our inaugural HfS 50 event to take place at New York's Soho Grand next April 24th-25th:

This is going to be a defining two-day working session for power-brokers of the outsourcing industry, where leading buyers of both ITO and BPO services will confront today's critical issues impacting outsourcing, to establish a Blueprint for the industry in 2015. And this time, we will have a vendor/buyer face-off session where leaders from six of the major service providers will join the debate.

Key Highlights

*The next generation account manager—making the role work for both parties
*The next generation governance executive—making the role work for both parties
*Disrupting the vendor/client model - getting better visibility and transparency into each others' pain-points
*Trends—what is around the corner for the industry and what will it look like in 2015?
*Trust—what has worked in building trusting relationships - and what has not?
*Community sourcing—how can social media and community networking drive better cross-client collaboration?
*Global Business Services frameworks—the next wave of value-creation, or glorified change management?
*The realities of disruptive sourcing: What is really going to change the game and how can these be effective:

Moving to standard business processes and platforms - reality or fantasy?

The uptake of Cloud computing - democratizing outsourcing?

Moving to genuine outcome-based pricing models - reality or fantasy?

Achieving real innovation with sourcing - reality or fantasy?

Do you have what it takes to make an impact?

If you are a buy-side sourcing governator and would like to get involved with the HfS 50, or a lead service provider executive, please email Tom Ivory for more information.

The outsourcing industry is a labor arbitrage bubble waiting to burst. And today’s smartest buyers and service providers are poised to fatally pop it and build a better future.

We know that buyers were accomplices in the run up. After failing to invest in their operations, buyers saw limited value in their business functions. Accounts payable teams were overwhelmed with paper, finance teams struggled with creating process rigor, and human resources teams bungled global resource management.

Struggling with recent macroeconomic issues, buyers simply didn’t have the time or resources to reengineer for greater value. So, they threw in the towel and asked service providers to manage their processes for them at a lower cost. To them, reducing the monetary size of their cost centers was success.

IT was no different and they were the biggest buyers of expensive labor. Their internal customers furiously revolted against swelling technology wai$tline$ and the lack of an “application development factory” mentality. So, in the midst of economic haircuts, CIOs surrendered by outsourcing their staff to offshore companies that brought CMM and ITIL process rigor. Yet, these efforts did little to simplify underlying application and infrastructure platforms that drove their high costs.

"On the road from the City of Skepticism, I had to pass through the Valley of Ambiguity..."

... and what better way to announce an exciting promotion than this quote from capitalism's founding father, Adam Smith that, well, pretty much sums up how the outsourcing industry needs to evolve beyond its labor arbitrage model. Yes, at HfS we sure this is what Mr Smith was really referring to when envisioning the wealth of nations over two centuries ago.

People keep asking me what makes HfS different from other analyst firms. Rather that take you through reams of cheesy PowerPoint to demonstrate our unique ways of developing and actioning data and insight, let's cut to the chase: what makes us different is our people. Essentially, we have a mix of personalities at HfS who come from practitioner, consultative, service provider and analyst firm backgrounds. We don't just hire kids and stick them in ivory towers, or professional ivory tower-types who just like sitting in their....er ivory towers. We focus on the practical, as well as the insightful:

If you're a buyer and you want help with your governance, we think you'd prefer to speak to an analyst advisor who has done just that as a buyer, who constantly talks to many other buyers to explore best practices;

If you're a provider and you want help with your messaging or positioning, we think you'd prefer to talk to an expert who has done just that for a provider and hobnobs with many other providers to explore best practices;

If you just want to get into your own ivory tower and pontificate with other ivory tower-dwellers, well, we can do that too (if you like) and have the ppt primed and ready for your scholarly satisfaction.

Our core mantra at HfS has always been to tackle the issues and complexities of global sourcing through the eyes of the buyer. One analyst who has spent nine years of his life doing just that, leading BPO governance for the $62 Billion healthcare payor, WellPoint, is our Governator himself, Tony Filippone.

Tony "The Governator" Filippone, concealing a baseball bat, is HfS' new Executive VP for Research (click for bio)

No single person in 2011 has written to - or talked with - more buyers about their governance challenges, and we are delighted to reveal to the world today his elevation to Executive Vice President of HfS' research team. Tony's role, is to ensure all our research is communicated to the buyer (and not the puffy stuff only advisors and providers pretend to understand). He is also tasked with pulling our ongoing data on industry trends and dynamics from our 63,000 network and making it meaningful and actionable to the world. And his ultimate religious quest is how to figure out, with the rest of the industry, how the hell we can all move on from the labor arbitrage model... so without further ado, I'll hand you over to Tony, who tweets (click to read on):

We've teamed with our esteemed industry colleague Ed Caso, Managing Director and Senior Analyst for the IT/BPO Services Equity Research Team at Wells Fargo Securities, to review the world of outsourcing in 2011... and take a peek at what's in store for 2012:

And while you are shrugging off your office party hangover and trying to avoid recalling what you were doing the night before*, we'll be deliberating the following topics:

How this year's economic uncertainty impacted sourcing behavior with outsourcing and shared services strategies across IT and business operations

How we expect to see 2012 shaping up with outsourcing adoption

How the financial mechanics of outsourcing have been impacted by the economic volatility - and what we can expect to see happening in 2012**

How Cloud Computing and Business Platforms are expected to impact global sourcing next year

Will the rising impact of social communities help buyers and providerhfs-s learn from each other?

For better or for worse, for richer, for poorer, until many missed SLAs do us part.

Imagine committing to someone for 15 years? Most marriages are long-divorced by that stage, companies rise and fall, entire countries are created, invaded and may even go bankrupt...

So how about standardizing life assurance and pension policies for said period, which is exactly what TCS' insurance services delivery subsidiary, Diligenta, has become wedded to in a 15-year, $2.2bn, 1900 employee marital partnership with the UK's Friends Life. This represents the largest life and pensions BPO engagement by a considerable margin, eclipsing the $1.1bn Prudential contract awarded to Capita in 2007.

At HfS, we believe this move from TCS signals a sea-change in the industry with regards to the growth strategies and ambitions of the leading BPO providers. Simply put, they are no longer keen to acquire each other, and see much more value ingesting large clients with domain and technology value. Taking on new clients, even at low-margins, is simply less risky from an investment perspective, and the value from developing on-shore domain capability and delivery platforms far outweighs absorbing all the unwanted mess you get when you take out competitors.

The BPO Holy Grail is no longer all about scale - it's also about removing as many manual elements from processes as possible

We've been rambling on a lot about Business Platforms of late, and we see this engagement as a genuine move by a provider to develop one that dominates the UK insurance sector. So let's keep this simple - the other day I made an electronic payment to one of our suppliers. Once the payment was completed, I had generously opted to pay the $25 transaction fee at my end for sending an "international payment" (even though it was all made in US dollars). Still wallowing in the pleasant thoughts about what a nice generous person I was, the next day I received a phone call

SAP has made a major move to "Cloudify" its software portfolio with the $3.4bn acquisition of the darling of HR software, SuccessFactors. However, while HfS' research partner Ray Wang succinctly outlines why this is a winning move for SAP, we do not believe this is particularly good news for BPO service providers and services clients.

This rampant consolidation of business software apps firms makes it tough for service providers to develop their own Business Platform offerings and develop outcome-based delivery models. As we have been discussing at length on HfS, the leading BPO providers are hurriedly developing service offerings that are underpinned by Business Platforms to support transactional, high-volume, standardized processes with very little variation in outputs. HR services are prime candidates to be optimized by Business Platform delivery, epitomized by ADP's GlobalView payroll and HRO offerings - arguably the industry's first Business Platform - introduced years before anyone even knew what a Business Platform was.

This means BPO providers have three choices with their Business Platform strategies

Choice 1: Develop and patent their own cloud-based workflows

This is surely where BPO service providers can really clean up, provided they can deliver complete clusters of standard process offerings for their clients that are cloud-based, affordable, scalable, high-quality and - most importantly - can be maintained with quality service personnel that can offer consultative support when needed, as the client seeks to transition onto the offerings. Most BPOs today are developing prototype platforms that they can "productize" as utility services, once they achieve a handful of clients using each offering. Our ongoing research already points to more than 150 business platforms in various nascent stages of development from the BPO providers.